Please find the new calculation formula for EPF. Check the entries as per the new calculation for your Employees Provident Fund; check the % of the amount contributed to the pension fund and how it calculates for the return on income for withdrawal or accumulation.
EPF is the most significant saving for retirement purposes and is governed by the EPFO department. The calculation formula is essential for the PF members to understand that it calculates the PF amount and interest on this accumulated Employees Provident Fund (EPF) amount.
Any organization with more than 20 employees is required to contribute to the PF of the employee; let us in detail how the EPF is calculated for the employees with the new calculation Formula.
15,000 is the benchmark salary for the employees in the current scenario; let us look at the 1st scenario in which the employee salary is below 15,000; both the employer and the employee need to contribute their EPF, and If the sum of basic pay and dearness allowance is less than 15,000, the Employee contribution is 12% towards the provident fund while the employer contribution is divided into following parts:
- 3.67% into the employee provident fund
- 8.33% into an employee pension scheme
- 0.5% into employee deposit linked insurance scheme
- 0.01% towards EDLIS administrative charges
Thus when can check the contribution of the employee and the employer using the above factors.
Now, let us look at the calculation of PF contribution if the employee salary, which includes the basic and DA, is more than 15,000; in this case, the employer can use three methods for calculating his share.
1st method – In this method, the employee contribution is 12% of the primary and dearness allowance of the employee, and employer contribution is 12% of basic pay = 8.33% of 15,0000.
2nd method – The employee contribution is the same in this method while the employer share is 3.67% of 15,000.
3rd Method – In this method, the employee contribution is 12% of 15,000, and the employer share is 3.67% of 15,000.
Let us look at the calculation in case the basic plus dearness allowance of the employee is 25,000.
As per method 1, the employee contribution is 12% of 25,000 which 3,000 while the employer contribution will 12% of 25,000 – 8.33% of 15,000 which is 3,000-1,250 i.e. 1,750
Therefore the employer contribution is lower than 1,750 in the case of the above example.
One can withdraw the PF amount at the time of retirement or withdraw the amount after fulfilling the minimum criteria for the service and specific described purposes like house construction, marriage, health reasons, etc.
